Greetings from Colorado, where I am taking part in the annual Aspen Ideas Festival. This week’s agenda will be dominated by anguished debates about the future of American democracy and social welfare, given the uproar unleashed by Friday’s Supreme Court decision to overturn the constitutional right to abortion. And the corporate executives in Colorado — and elsewhere — will face some tough questions about their ethical obligations in relation to this, giving a new twist to the concept of ESG.
In recent days companies such as Disney, JPMorgan, Patagonia, Levi Strauss and Microsoft have pledged support for staff seeking abortions who need to cross state lines. However, as we noted last week, Republican-controlled legislatures are increasingly threatening to retaliate against companies that are perceived to be upholding “woke” (ie progressive) values, not just in relation to climate change but social issues too. Indeed, Republicans in Congress have already warned Citigroup of repercussions because its management had pledged to reimburse staff for travel costs incurred while seeking an abortion.
As a result, as the FT reports, many other companies are trying to keep their heads down, while they seek to (re)define how to behave in an “ethical” way in these partisan times. Will this work? We would love to hear what you think — not least because Jen Stark of the Center for Business and Social Justice is warning that these corporate dilemmas will only get worse in the months ahead. “The fall of Roe is just the end of the beginning,” she told the FT. “Companies in America have become this firewall when it comes to mitigating the harm of extreme social policy in the states.” Yikes.
Meanwhile, another topic that will be dominating the agenda in Aspen is climate change. So check out our important story below from Australia about a new legal tactic that environmental campaigners are using to hold companies responsible for the destruction of coral reefs. And also look at the readers’ responses to a debate we stirred up about ESG and emerging markets. We love getting your thoughts on these topics; please keep them coming — on abortion rights (and whether it should now be a feature of the “S” in ESG), or anything else. (Gillian Tett)
The case that will ‘open the floodgates’ on climate lawsuits?
Can an oil and gas company be held responsible for the destruction of a reef thousands of miles away from where it is drilling? Lawyers in Australia believe so — and they intend to prove it in a landmark case launched last week against Woodside Energy.
The case, brought by the non-profit Australian Conservation Foundation, is attempting to halt Woodside’s $12bn Scarborough project, which would develop a huge gasfield off the west coast of Australia. The field contains approximately 11tn cubic feet of natural gas, which would be liquefied at an onshore facility and shipped to Asian markets from 2026.
Woodside says the total emissions created by extracting and burning this gas will be 878mn tonnes of carbon dioxide equivalent — more than Australia’s entire annual carbon emissions of about 500mn tonnes. A report by Climate Analytics puts the figure even higher, at 1.37bn tonnes.
The ACF argues these emissions will directly contribute to the destruction of the Great Barrier Reef, more than 3000km away on Australia’s east coast. It will rely on climate “attribution science” to prove a causal link — arguing there is a scientifically proven connection between greenhouse gas emissions, rising global temperatures and the coral bleaching that causes reefs to die.
The ACF has put an actual figure on the warming Scarborough will be responsible for: 0.000394C. The group says this seemingly small increase “will result in the deaths of millions of corals during each future mass bleaching event”.
Parts of the case are specific to Australia. Under federal law, offshore oil and gas projects are prohibited if they are likely to cause significant damage to the Great Barrier Reef. Previous attempts to shut down projects using this law have focused on local impacts such as water pollution. The use of attribution science in this case gives it a new dimension.
Brendan Dobbie, a solicitor with the Environmental Defenders Office, the law firm representing the ACF, told Moral Money that very few cases had attempted to use attribution science in this way, and he was not aware of any case globally that had done so successfully. If successful, he believes this suit will have “a big influence on the way that decision making for future fossil fuel projects is done”.
Perhaps the most high-profile case to use climate attribution science is one brought against German power company RWE by a Peruvian farmer, who claims his property is at risk of flooding as global warming has melted a glacier above the town of Huaraz. First brought in 2015, the case has not yet concluded so provides no precedent.
Bill Hare, a climate scientist with Climate Analytics who co-authored a study on the Scarborough project and has provided advice on the RWE case, told me the link between greenhouse gas emissions and coral bleaching was “uncontroversial”. He said the real question was whether Scarborough’s contribution is proportionally significant enough to be considered a risk. If the judge is convinced of that, the next question will be whether those emissions are in fact net additional emissions.
“Woodside would say, hey, hang on, this gas is going to replace coal, and therefore this gas is going to reduce global CO₂ emissions,” he said. Hare rejects this “substitution” argument, but Woodside may present evidence that supports it. The company claims Scarborough will provide gas to help Asian countries’ transition away from more carbon-intensive coal.
Arjuna Dibley, a climate law expert and director at climate consultancy and investment firm Pollination, told me even if the ACF is unsuccessful, the case’s use of attribution science could break new ground in climate litigation.
“Once there is a clear legal position on attribution between emissions and a climate outcome, then that really opens the floodgates for cases against companies that have historically emitted significantly,” he said. (James Fernyhough)
Right of reply
We had some very interesting reader responses to our recent edition looking at concerns that the rise of ESG strategies is squeezing capital flows to emerging markets.
Some took issue with the thrust of the report we mentioned from research group Intellidex. Shounak Bagchi and Kate Ahern, of emerging markets-focused investment firm Cartica Management, said that while Intellidex was right that ESG data in emerging markets were often absent or questionable, this was “a global problem, and not only an emerging market challenge”.
Others felt Intellidex had highlighted some dangerous blind spots for many in the ESG space. Former World Bank vice-president Madelyn Antoncic said that there had been a troubling shift in emphasis from sustainable development to a narrow focus on net zero. Key to addressing this, she said, would be improvement of data and reporting around the UN Sustainable Development Goals — something she is now working on at New York University’s Development Research Institute.
Benjamin Weiss of Veracity Worldwide, which advises companies operating in emerging markets, questioned the idea that “more ESG data and metrics is the answer”, saying that these were too often based on self-disclosure or press reports. Top investors were instead turning to “thoroughly researched, industry-tailored, jurisdiction-specific insights”, said Weiss, and using these to pursue investment in developing nations “with their eyes wide open”.
Jyrki Kalliosaari, a business consultant focused on east Africa, argued that while the ESG agenda might restrict the flow of capital to some developing countries in the short term, it could help to encourage better governance standards over time. “Too often before the rise of the ESG, investors in industrialised countries have been content to line the pockets of rich and corrupt leaders.”
If you’d like to share your thoughts on this or any other subject, please drop us a line at moralmoneyreply@ft.com. (Simon Mundy)
Smart Read
-
In recent weeks there has been a wave of stories about criticism of ESG, which have prompted some observers to warn that the concept is already past its peak. But what are investors and financial groups actually doing with their money in relation to ESG funds and climate investing? Check out this piece on the latest data emerging from Britain’s wealth management industry; the answer may surprise you.
